The phenomenon of OEM is relatively common in China, and OEM can be understood as a major trend in the international division of labor environment, where production and sales are separated. But relatively speaking, although the OEM side is free from the distraction of many aspects of sales, can focus on the production of orders, but can not share the value of the brand.
Thus, in the international division of labor, the commissioning party is still in a subordinate position, with lower profit margins. For example, the Foxconn labor-gate incident can be interpreted as a substitute worker with lower passive profits, in fact, at the expense of the rights and interests of the majority of the workers at the bottom of the hierarchy.
At the same time, the OEM phenomenon is particularly high in the rate of electronic products, such as notebooks in the famous OEM manufacturer Quanta produced notebook computers accounted for 30% of the global notebook units up and down (2005) and Quanta does not have its own notebook brand.
IT data company iSuppli said 86 percent of the world's notebook computer sales from China (August 2006 data). However, they are mainly produced under the name of Dell, Hewlett-Packard and other OEMs.
The difference between OEM and ODM lies at the core of who actually enjoys the intellectual property rights of the product, if the commissioning party enjoys the intellectual property rights of the product, it is OEM, which is commonly known as "OEM"; and if it is the overall design carried out by the producer, it is ODM, which is commonly known as "OEM". "Labeling". [Edit] OEM and brand difference In China's manufacturing industry, there are some factories, although not well known but is the world's leading brands of OEM manufacturers. These factories receive production orders from world-famous brands after production, by the Chinese OEM (OEM) factories out of the production is often sold at extremely high prices. While the brand gets high profits, the OEM factory only gets a small profit. These OEM factories are known as the stealth brand name or the brand name behind the brand name, referring to the brand name for the international famous brand processing customized products, Yagor and Grantham used to be the stealth brand name.
British national treasure luxury brand Burberry (Burberry) recently defied the domestic multiple resistance resolutely relocated to China. Has the phenomenon of "cheap OEM labor for luxury goods in China" gradually moved from the underground to the stage since then?
Barberry closed its main British factory in the Rhondda Valley region of South Wales because it "could not continue to operate commercially," according to the brand's "globalization" plan last September. Under the brand's "globalization" plan last September, the "flashy British brand" will officially move its production lines to Shenzhen, Guangdong Province in mainland China.
But the brand did not announce the move on its official website. According to British media reports, Burberry is facing a lot of resistance to the closure. Over the past few months, there have been demonstrators in Paris, New York, Las Vegas and London stores outside the sign protests, entertainment celebrities, government executives, and even the British Crown Prince Charles have joined the ranks of the petition, but have failed to stop Burberry's determination to move the factory. It is understood that the closure of the Wells plant before the production of about 20% of the Burberry Polo T-shirts. This production line will now be moved to the other four existing Polo T-shirt factories scattered in China, Poland, Portugal and Spain and other countries. Some analysts point out that Burberry's move to China is an extension of its strategy in Japan since 1997.
And Burberry "fanfare" to relocate factories in China is different, many luxury brands have been "quietly" in China for OEM production. According to an understanding of international luxury goods in China manufacturing background of the industry, Armani and other top global clothing luxury brand production line has long been settled in China. Sources say that in early 2007, Louis Vuitton has found an authorized manufacturer in China, and began to set up a production base in Hangzhou, Zhejiang Province.
For example, Hong Kong's Osha Group, formerly an OEM factory for international high-end clothing brands, has a history of OEM work for international famous brands dating back to 1957. The group for the international luxury women's brands and world famous brands OEM production, just because of the confidentiality agreement constraints on ordinary consumers do not know much, but in the clothing industry session has long been the title of the stealth brand, the production of clothing to fabrics exquisite, high quality, quality and cheap known.
Shenzhen, Guangdong Province, Dongguan and other cities, as well as Wenzhou, Zhejiang Province and other places, some enterprises, has also been accused of engaging in international luxury OEM production. A director-level designer of Ermenegildo Zegna, a luxury brand that started out by producing top-quality fabrics, has also said in public that China's Zhejiang province is an important source of high-end fabrics for the brand's ready-to-wear garments.
The advantages of OEM
"In the eyes of most consumers, these luxury brands are produced overseas and have the label of origin. But in fact many luxury brands have already chosen to relocate their production factories to China." Kun Ouyang, executive publisher of the Chinese version of the Global Luxury Report, revealed that due to the pressure on costs and transportation, it has become an inevitable phenomenon for China to manufacture international luxury goods.
A luxury goods licensee, who did not want to disclose his name or the name of his company, said that luxury goods production "is shifting to China mainly because of China's low production cost," according to Beijing Business Daily. The person disclosed that, according to his understanding, the hourly wage of workers in overseas garment production factories is about 20 U.S. dollars, and the working hours are fixed; while the wages of Chinese workers are very low, and the labor cost is only 1/20 of that in Italy, and they can often work overtime. The cooperation with domestic licensed producers also saves luxury goods dealers from the huge investment in fixed assets needed when expanding the scale of product production. [Editorial] Taboos of OEM of luxury brands According to the above-mentioned authorized luxury goods producers, although it is an indisputable fact that China has become the largest luxury goods manufacturing country in the Asia-Pacific region, but the luxury brands that have established a relatively perfect production network in China are "more taboo and unwilling to disclose" the status quo of OEM of their own products in China. ".
The source said that in order to prevent the disclosure of the news that their products are manufactured by Chinese OEMs, some luxury brands have even forced authorized producers to sign confidentiality agreements. Some first-tier brands even look for processing factories in remote locations to provide OEM services in order to hide the fact that they produce in China or other developing Asian countries, and some home-based processing factories are not even known to locals.
"Almost all of the authorized producers in the country have signed protection agreements and are forbidden to disclose any details." The source said this is mainly due to luxury brands for their own considerations, and the confidentiality agreement prevents the luxury consumer base from having psychological fluctuations that could lead to negative reactions to their products.
Foreign first-tier and second-tier brands have production lines in China has long been a common fact, and according to its understanding, the major luxury brands have not been secretive about this, "but only for the sake of the brand's marketing strategy, not to sell Chinese-made products in China.
According to its introduction, many luxury brands have foundries around the world, and by convention, the production and sales of their products always cross. For example, you can't buy Armani garments labeled "Made in China" in the Chinese market, but he himself bought an Emporio Amarni T-shirt in Italy last year with a label stating "made in China". [Editorial] OEM factories gradually build famous brands on the one hand, the world's leading brands have OEM in China, on the other hand, OEM factories also have branding. There is no lack of successful cases, such as Yagor, Glanz, Foxconn and so on. These OEM factories used to be called stealth brand name or brand name behind the brand name, refers to the brand for the well-known brand processing customized products, Yagor and Granz used to be stealth brand name.
The emergence of the stealth brand name breaks the price monopoly of the well-known brands, so that consumers can really get the benefits. Such as microwave ovens used to be high-grade electrical appliances, the price is generally in a few thousand dollars or more, the emergence of the Granz provides a low-priced, high-quality products. It rapidly popularized the microwave oven. Invisible brand names often allow consumers to buy the same products as internationally recognized brands at one-fifth or even one-tenth of the price. In the face of the same quality and products, but can buy 50% or even 1% off the product, relying on excellent quality and low prices, these OEM factories quickly grew into China's famous brand or even the world famous brand.
For example, the Hong Kong Osha Group, mentioned earlier, was separated from the garment factories in 2007 and registered independently as a group company and registered the trademark of Osha (O.SA), which started the branding initiative. In 2006, O.SA began to expand its business in China, with a branch in Shenzhen, China, and a number of e-commerce sites, mainly engaged in apparel e-commerce, attempting to sell apparel through the network, and in 2008 began to cooperate with Taobao in China. In 2008, O.SA started to cooperate with Taobao.com in China. Meanwhile, in 2008, the company cooperated with American Eagle Outfitters to launch a new e-commerce site for Martin+Osa's premium branded apparel. A short period of effort has begun to bear fruit.
Currently, China's OEM factories have seen the rapid rise of "stealth brands" that have gained momentum, which I believe will be helpful for China's industrial transformation as well as for consumers to get more bang for their buck. With the branding of OEM, the difference between OEM products and branded products is gradually blurred.